GM turnaround plan

I’m worried that my brother – and many other good people – could lose their jobs in the GM bankruptcy (filing doc pdf). Now is not the time to point fingers or argue over the same stale disagreements that have existed for years, but a time to figure out how to make business better for the future.

The turnaround plans I’ve read in the media seem to consist mainly of wiping out shareholders (done), swapping debt for equity, and starting over. However, I haven’t seen much to address what I believe are structural problems at GM, such as:

  • Splitting the finance arm from manufacturing
  • Divesting the international divisions (Opel, Vauxhall, Saab)
  • The failed ideas of globalization
  • Improving labor relations (okay, they’re giving part of the company to the union to erase a debt, but what are they actually doing to improve morale & productivity of the workers, or to create a pipeline of talented engineers and skilled technicians?)

So I wrote a turnaround plan for GM, admittedly from outside looking in. Hopefully some of it will fall on the right ears in Detroit, Washington, New York or Germany. You can download my GM turnaround plan from hayleyinternational.com. Although I wrote the presentation with GM in mind, many of the ideas are also relevant to other struggling, 20th century businesses.

Download GM turnaround plan – Powerpointhtml

I was influenced by ideas from others, most notably Option Armageddon and Umair Haque. If I overlooked any credits in the presentation, please let me know. If you use any of the ideas in the presentation, please also be so kind as to give credit.

My presentation is certainly no silver bullet to the GM restructuring (there’s billions in bondholder obligations), so feel free to add ideas in the comments or contact me for discussion.

Ward Welvaert

GM Bankruptcy

More talk today about a possible GM bankruptcy. Well, a monkey with a calculator could have figured out GM was bankrupt years ago, if you accounted for their off-balance sheet liabilities. Instead of addressing the problem then, GM stuck its head in the sand, overproduced cars and offered in-house financing to sell cars that the market couldn’t support, and thus to make their own numbers look better. The credit crisis didn’t hurt GM, GM helped create it.

On a different note, instead of fixing their disastrous labor relations GM tried to get rid of its union workforce and go to the greener pastures of Mexico. How’s that whole globalization thing working out?

Let’s have a look at a US made car, as seen on the road here in Peru, shall we:

US made car in Cusco, Peru

US made car in Cusco, Peru

Now take a look at the vast majority of cars on the road in Peru: made in Japan, Korea, and China.

Kind of says it all. The US auto industry messed up globalization beyond belief.

I’m not a happy camper about this: my brother works for GM in Europe, he and a lot of other good people might lose their jobs. This weekend I’m going to the beach. I’m writing a turnaround plan for GM, see if I won’t.

Corporate workshop

I will be in the US during April – May. I just finished up a 2-day corporate workshop that I’ll be offering while I’m in the US.

The idea of this workshop will be to challenge participants to erase the destructive corporate culture of the late 20th century and replace it with new, responsible thinking. Any inquiries or referrals, please contact me.

Ward Welvaert
ward DOT welvaert AT gmail DOT com
919 889 9208

AIG bailout politics

The political posturing around the AIG bailout back home in the US almost makes Peruvian politicians look sincere…

Remember when former NY Attorney General Elliot Spitzer – not exactly the poster boy for ethics himself – keelhauled then-CEO Maurice “Hank” Greenberg in 2005? Here’s what Greenberg recently said about credit default swaps at AIG:

“However, he said AIG’s sales of credit default swaps “exploded” after he left the company in March 2005. He said AIGFP reportedly wrote as many credit default swaps in the nine months after he left than it did during the previous seven years combined and, he maintained, too much of its new business was tied to the subprime market.”

Instead of all the posturing, let AIG fail. It was just a house of cards. AIG’s business model of insuring investments only created a false illusion of security. Letting AIG fail would be a good first step to cleaning up both the financial system and ethics in business.

Bailouts and political posturing don’t change the fact that money is just a funny printed paper. Real productivity, what we contribute to society in tangible terms, and the tangible things you expect to get in return, is what matters. Just printing up more money so old guys in suits can continue to get ridiculously rich doesn’t seem like the solution to me.

Message to Jeff Immelt:

Jeff,

There’s no real easy way to say this: please quit screwing my friends!!!

I’m sorry. This blog was previously free of profanity.

But Jeff, sometimes it’s better to say what you really think, and I honestly feel bad for my ex-collegues at GE who saved up for their retirement in GE stock. I got sentimental once and bought about $1,200 worth of GE stock for my 401(k), it’s probably worth $200 now. Some of my friends had their entire life savings in company stock, now they’ll be saying “hello, welcome to Wal-mart” for the next 20 years.

What really makes me angry Jeff, is that I remember seeing a memo from you several years ago saying “we still do too many things by the rules of some old playbook.” So I think you knew long ago the culture you inherited from the GE of Jack Welch was nothing but a grand illusion, but why didn’t you do anything about it?

Jeff, ayude me pues, GE’s Short/Current Long Term Debt alone is $193 billion, that’s 6 times the entire foreign debt of Peru, a country of 29 million people.

But let’s put things in perspective Jeff. Fly down here to Cusco (economy ticket on LAN is $800) and I’ll introduce you to a 10 year old kid in my English class. He has no hands but is happy as anything, he gets by just fine despite his disability. I can also introduce you to about 4,000 other kids where I teach, every one of them believes tomorrow will be better than today, and so do I.

I’ll also introduce you to Mama Vicky, who worked the land with her own two hands her entire life. Funny thing Jeff, Mama Vicky might “be worth” more than all of GE right now, since she has a house in a good area of Cusco – and no debt. But the point is this: she worked hard to provide tangible things to her family for eighty-some years, and GE can do the same thing.

GE makes lots of great things, tangible things, but GE culture is lousy. When I was at GE Jeff, kids with MBAs who didn’t know which pointy end of the airplane goes down the runway first had better career opportunities than hard working engineers and technicians. And what’s up with V-dollars? Come on Jeff, that sounds ridiculous even for a guy who went to business school.

I like how you cut the dividend Jeff, it was a decision based on reality. Quit worrying about AAA credit ratings. I know, I know, it affects the cost of capital. But borrowing money like it’s going out of style is what got us in this predicament, so let’s not borrow any more, okay Jeff.

Come have a few cervezas at Mama Africa with me and we can talk about how to ditch GE’s stale old 20th century culture and split of the industrial businesses in a successful IPO.

Seriously Jeff, you might think I’ve been drinking too much coca tea, but GE was a standard-bearer for business in the late 20th century, and that kind of culture is exactly what caused the recession. So let’s stop doing things like we did in the 20th century, that was a decade ago. Let’s look forward and start a radical overhaul of GE, so my friends can say “Welcome to Key West” or wherever they choose to retire, not “Welcome to Wal-mart” for the next 20 years.